I finally went ahead and added a new company to my portfolio. We are, again, under the threat of a trade war. Therefore, I’d rather buy a company less likely to be hit by such a dispute. This led me to buy 23 shares of Medtronic (MDT). Medtronic is the world’s largest manufacturer of biomedical devices and does business in 120+ countries. Products consist of cardio/vascular implants, and a wide variety of restorative therapies. These therapies include spinal, neuromodulation, diabetes, and surgical technologies. The company is well diversified internationally, headquartered in Ireland, and near recession proof.
In recent years the company has experienced significant revenue growth. In 5 years Medtronic’s revenue has grown, on average, 12.9% annually. As of fiscal 2018 the company reported a total of $30 billion in revenue. Unfortunately, Medtronic has been trading in the $70-80 range for several years. Reason being, earnings growth has been stagnant (-2.1%) over the same 5-year period. This moderate decline was due to the challenges of integrating Covidien, a recent acquisition. The company also took a $2.2 billion hit due to tax reform. These problems appear to be short lived as the company is projected to grow earnings by 8%+ in 2019.
Overall, Medtronic appears to be a solid company with excellent growth prospects. After all, the company has a track record of being highly innovative and is literally in the business of saving lives. For instance, the company recently secured approvals for some new products. One such product is Guardian Connect, a continuous glucose monitoring system for diabetics between the ages of 14 and 75. Another is Resolute Onyx, a drug-eluting stent for small vessels. Medtronic is also engaging in numerous clinical trials and R&D to further augment its portfolio. Furthermore, its completed integration of Ireland-based Covidien and expansion into emerging markets should continue to pay off.
I bought the stock Monday and already experienced a 9% dividend hike, just days later. Even better, this payout ratio is only in the mid-30s, leaving ample roof for growth. Medtronic is also financially strong with a debt-to-equity ratio of 0.5. The company’s P/E of 17 is in line with its historic average. This would indicate Medtronic is trading close to its fair value. In summary, Medtronic has double digit earnings growth potential, a solid 40+ year dividend history, and operates in a near recession proof industry. The company also appears immune to potential trade disputes. Despite broad market declines last week Medtronic’s share price actually increased. These strengths make MDT a welcomed addition to my portfolio, especially in these turbulent times.
DISCLAIMER: I am long on Medtronic stock. I am not a licensed investment adviser or tax professional. I am not liable for any losses incurred by any parties. This blog should be viewed for entertainment and/or educational purposes only. Any transactions published are not recommendations to buy or sell any securities. Please consult with an investment professional before making investment decisions.